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Duke  University  Libraries 

Report  of  the  S 
Conf  Pam  12mo  #177 

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REPORT  OF  SECRETARY  OF  TREASURY, 


TREASURY  DEPARTMENT,  C.  S.  A. 
Richmond,  May  2,  1864. 
Hon.  A.  II.  Stephens, 

President  of  the  Senate: 

Sir — I  have  the  honor  to  submit 
the  following  Report  of  the  condition  of  this  Department  on  the 
1st  April,  1864. 

The  receipts  into  the  Treasury  for  the  two  quarters  ending  on 
that  day  are  as  follows : 

4  per  cent,  call  certificates,  act  March  23, 1863,  $1,343,000  00 

4    "      "      coupon  bonds,      "        "       "      "  40,473  90 

4  "      "      registered  stock,  act  Feb.  17th,  1864,  250,1)00,000  00 

5  "      "      call  certificates,  act  March  23,  1863,  38,812,500  00 

6  "      ':      bonds  and  stocks,  act  March  23,  1863.  12,043,000  00 

7  "      "         •■       "        "       act  Feb.  .20,  1863,  2,361,300  00 

8  "  "  registered  stock,  act  May  16,  1861,  190,100  00 
8  "  "  bonds,  act  August  19,  1861,  26,650  00 
8  "  "  bonds  and  stocks,  act  Feb.  20,  1863,  2,194,600  00 
6  "  "  cotton  interest  bonds,  act  April  30,  1863,  6,160,000  00 
Premium  on  same,  2,815,000  00 
War  tax,  59,406,724  01 
Treasury  notes,  265,600,928  50 
Sequestration,  3,000,787  37 
Re-payments  by  disbursing  officers,  42,772,222  42 
Customs,  441,094  32 
Overseers'  exemption  and  tax  on  non -combat,  '  595,036  95 
Export  duty  on  cotton,  ,  14,322  50 
Patent  fund,  26,957  00 
Interest  on  loans,  4,208  71 
Dep'd  under  12th  sec.  act  Feb.  17.  1864,  by  States,        471,300  00 

«     18th  "      "      "      "       "  367;600  00 

Miscellaneous,  2,615,475  55 


Total,  $691,393,281  23 


The  expenditures  during  the  same  perio%  arc  as  follows: 

War  Department,  238,572,374  25 

Navy,  10,853,723  27 

Customs,  26,32",  93 

Civil,  miscellaneous,  and  foreign  intercourse,.  5,611,299  00 

Public  debt,  128,046,836  50 


$383,110,559  04 


Balance  in  Treasury,  $308,282,722  19 

This  balance  is  made  up  as  follows : 

Notes  funded  and  on  hand  for  cancellation,  $250,000,000  00 

Notes  returned  by  disbursing  officers  42,000,000  00 

Balance  cash  in  hand— about,  16,000,000  00 


The  public  debt  on  the  1st  of  April,  1864,  was  as  follows : 

Funded. 

Act  Feb. -28,  1861,  8  per  cent.  15,000,000  00 

Act  May  16,  1861,        "  8,891,700  00 

Act  August  19,  1861,    "  100,000,000  00 

Act  April  12,  1862,        "  3,182,850  00 

Act  Feb.  20,  1863,        "  95,763,700  00 

Act  Feb.  20,  1863,  7  per  cent.  66,318,550  00 

Act  March  23,  1863,  6  per  cent.  11  646,200  0(V 

Act  April  30,  1803,       "  8,393,000  00 


$309,196,000  00 


To  which  must  be  added  the  following  call 
certificates  outstanding,  to  wit: 

Act  Pec.  24,  1861,  6  per  cent.  $40,439,170  00 
Act  March  23,  1863,  4  per  cent.  1,825,000  00 
Act  March  23,  1863,  5  per  cent.      72,074,100  00 


114,338,270  00 
7.30  interest  bearing  Treasury  notes,  99,996,400  00 


Total,  $  523,530,670  00 


o 

Unfunded. 

Act  of  March  9th,  1861,  int.  notes  $3  65,  $534,500  00 

Act  of  May  16th,  1861,  two  year  notes,  8,204.575  00 

Act  of  August  19th,  1861,  general  currency,  154,356,631  00 

Act  of  April  17th,  1862,  denom'n  of  $1  and  $2,  4,516,509  00 

Act  of  Oct.  13th,  1862,  general  currency,  118,997,321  50 

Act  of  March  23,  1863,  general  currency,  511,182,566  50 


Total,  $797,792,103  00 

From  this  is  to  be  deducted  the  amount  of  re-pay- 
ments of  old  currency  by  disbursing  officers,  and 
also  the  amount  of  notes  received  for  4  per  cent, 
certificates  which  are  in  the  Treasury  awaiting 
cancellation,  292,000,000  00 


$505,792,103  00 


The  balances  of  appropriations  not  drawn  on  1st  April,  1864,  were, 

War  Department,  $502,329,110  21 

Navy  Department,  •  33,046,775  79 

Civil  and  miscellaneous,  including  customs,  72,865,683  39 


Total,  $608,241,569  39 

The  estimates  submitted   by  the   various  Departments  for  the 

support  of  the  Government  to  the  end  of  the  calendar  year,  say 
31st  December,  1864,  are  as  follows: 

Legislative,  $245,625  00 

Executive,  salary  of  President,  &c,  37,350  00 

Treasury  Department,  22,508,462  50 

Wa/  Department,         ■  483,131,598  00 

Navy  Department,  10,059,923  78 

State  Department,  44,914  00 

Department  of  Justice,  347,991  58 

Post  Office  Department,  165,583  40 


Total,  $516,541,448  26 

The  foregoing  statements  show  that  the  estimates  in  December 
last  for  the  six  months  ending  1st  July,  1864,  are  greatly  beyond 


the  requirements  of  the  Government.  It  appears  from  them  th.it 
the  whole  expenditure  for  all  branches  of  tho  Government  for  the 
six  months  ending  1st  April,  18G4,  amounted  to  $255,563,722,  and 
that  the  unexpended  balance  then  standing  to  the  credit  of  appro- 
priations was  $608,241,569.  The  anticipated  tax  upon  the  cur- 
rency, which  was  to  accrue  on  1st  April,  doubtless  kept  back 
requisitions  for  debts  accruing  since  the  17th  February,  when  the 
Tax  Act  was  passed.  It  would  be  proper,  therefore,  to  add  for  this 
item  about  75  millions  to  the  expenditure.  The  total  expenditures 
for  the  six  months  would  then  be  about  330  millions,  and  the  bal- 
ance to  the  credit  of  undrawn  appropriations  would  be  about  523 
millions.  These  figures  establish  the  conclusion  that  the  money 
appropriated  for  the  six  months  ending  1st  July,  1864,  will  not  be 
required,  and  that  the  excess  may  be  applied  to  diminish  the  appro- 
priations required  for  the  six  months  ensuing  the  1st  July,  1864. 
It  appears  that  the  monthly  expenditures,  at  tho  outside,  average 
about  54  millions,  and  consequently  for  the  three  months  to  ensue 
from  1st  April  to  1st  July,  1864,  the  proper  expenditure  of  those 
three  months  would  be  $162,000,000 

But  to  this  must  be  added  the  item  already  explained 
of  amount  of  debts  suspended  on  account  of  the 
anticipated  tax  on  the  currency,  say  75,000,000 


This  aggregate,  237,000,000 

deducted  from  the  total  balance  of  undrawn  appro- 
priations, 608,241,569 

leaves  this  balance,  $371,241,069 

available  for  expenditures  for  six  months  beyond  1st  July,  1864. 
It  should  further  be  observed  that  the  estimates  submitted  by  tho 
Departments  are  made  with  relation  to  the  present  rate  of  prices. 
If  that  rate  can  be  reduced,  a  corresponding  reduction  could  bo 
made  on  the  estimates  themselves. 

The  first  and  most  important  inquiry,  therefore,  is  as  to'  the 
probability  of  a  reduction  of  prices.  All  the  financial  measures 
proposed  to  and  adopted  by  the  last  Congress  looked  to  this  result. 
The  scheme  offered  by  the  Secretary  of  the  Treasury,  and  that 
adopted  by  Congress,  both  sought  by  different  means  to  effect  the 
same  object.  Which  of  the  two  would  have  proved  most  successful 
it  would  serve  no  useful  purpose  to  consider.  It  is  the  plain  duty 
of  the  Government  to  execute  the  scheme  adopted  by  Congress,  and 
every  effort  has  been  directed  to  its  successful  prosecution >  It  is 
yet  too  early  to  perceive  all  the  results  which  it  will  effect ;  but  it 


is  quite  clear  already  that  the  reduction  of  currency  which  it  will 
produce  is  great  and  decided. 

On  the  1st  April,  when  the  reduction  was  to  commence,  the 
whole  issue  of  general  currency  (represented  by  the  Tieasuiy  notes 
bearing  no  interest)  amounted  to  about  800  millions.  Of  this 
amount  50  millions  were  probably  at  the  credit  of  the  different 
disbursing  officers  throughout  t li--  Confederacy,  leaving  '750  mil- 
lions as  the  actual  circulation.  Of  this  amount  about  250  mil- 
lion- have  been  funded,  east  of  the  Mississippi  :  and  it  may  fairly 
be  presumed  that  50  millions  more  will  be  funded  west  of  the 
.Mississippi  ;  thus  leaving  in  circulation  450  millions.  The 
depositaries  were  directed  to  discriminate  in  their  reports  between 
the  noiea  of  one  hundred  dollars  and  those  under  one  hundred, 
which  have  been  funded.  Only  a  few  of  them  have  made  reports 
in  which  this  direction  has  been  complied  with,  most  probably 
from  want  of  time  to  separate  notes  But  those  few  are  in  the 
cities,  where  the  hundred  dollar  notes  would  be  likely' to  accumu- 
late. They  disclose  the  remarkable  fact  that  less  than  one-half,  in 
some  cases  not  more  than  one-third,  of  the  notes  funded  are  one 
hundred  dollar  notes.  It  may  be  assumed,  therefore,  that  not 
more  than  one-half  of  the  whole  amount  funded  consists  of  one 
.hundred  dollar  notes.  By  the  terms  of  the  currency  act,  these 
notes  are  thrown  out  of  circulation  after  1st  April,  and  are  taxed 
10  per  cent,  per  month  until  extinguished.  It  is  important,  there- 
fore, to  ascertain  the  amount  of 'those  now  outstanding. 

The  whole  amount  of  one  hundred  dollar  notes  issued  to  the  1st 
April,  1864,  was  318  millions.  It  is  probable  that  of  the  50  millions 
of  dollars  remaining  at  that  date  to  the  credit  of  disbursing  officers, 
a  large  proportion  is  represented  by  these  notes,  say  40  millions, 
thus    leaving   278  millions  of  them   in   circulation.     Deduct  from 

this  sum  oue-half  of  the   totai   amount  funded,  which,  as  already 

« 

stated,  consists  of  one  hundred  dollar  notes,  to  wit,  150  millions, 
and  there  are  left  unfunded  128  millions,*)!'  these  notes.  This 
sum,  therefore,  constitute"  that  remainder  whose  amount  we  have 
been  seeking,  and  is  to  be  deducted  from  the  450  millions  left  as 
the  entire  circulation  after  the  funding.  The  result  is  that  the 
whole  currency  would  then  stand  at  322  millions.  Deduct  from 
this  balance  the  tax  of  one-third  which  is  imposed  by  the  currency 
act,  and  the  actual  currency  left  in  circulation  is  214  millions  and 
a  fraction. 

It  is  only  necessary  for  the  public  mind  to  apprehend  fully  this 
st^te  of  things,  and  it  would  seem  impossible  to  avoid  a  great  and 
sudden  fall  of  prices.     This  fall  has  been  checked  by  the  unfortu- 


nate  feature  of  leaving  the  five  dollar  notes  current.  .Sellers,  par- 
ticularly of  necessary  articles,  have  had  the  excuse  of  demanding 
an  indemnity  for  the  future  tax  on  tl  »;   but  the  time  is  at 

hand,  when  they  will  share  the  fate  of  other  notes,  and  the  entire 
old  currency  must  disappear.  Another  reason,  which  has  checked 
the  reduction  of  prices  of  articles  of  prime  necessity,  is  the  exone- 
ration of  the  planting  and  farming  <  .m  taxes.  Thej  have 
thereby  been  enabled  to  retain  their  products.  But  when  the 
whole  scheme  of  Congress  shall  go  into  full  operation,  say  1st  July, 
the  reduction  of  currency  will  he  so  great  that  it  is  scarcely 
bin  that,  orices  can  bo  maintained  at  existing  rates.  The  conclu- 
sion, then,  seems  fair  that,  if  the  currency  can  be  restrained  within 
the  limits  to  which  it  has  been  reduced,  the  estimates  called  for  by 
the  Departments  may  be  greatly  reduced.  This  result  will  depend 
upon  the  extent  to  which  the  new  issue  of  Treasury  notes  is  carried. 
The  law  directs  the  issue  of  two  dollars  of  new  notes  for  every  three 
dollars  held  in  private  hands,  with  the  exception  of  one  hundred 
dollar  notes,  and  notes  under  five  dollars.  It  also  authorizes  the 
Secretary  of  the  Treasury  to  issue  in  the  same  manner,  two  dollars 
for  every  three  dollars  received  at  the  Treasury  under  the  provis- 
ions of  the  currency  act. 

Assuming  the  figures  above  stated  as  probable  estimates  of  the 
result  of  funding,  the  amount  of  new  currency  to  be  issued  for  ex- 
changes with  private  parties,  will  be  214  millions  ;  and  the  issues 
authorized  to  be  made  for  the  use  of  the  Government/would  amount 
to  two-thirds  of  300  millions,  or  200  millions.  The  aggregate  of 
these  two  would  carry  up  the  currency  again  to  414  millions. 

This  amount  is  more  than  twice  the  sum  which  in  previous  re- 
ports I  have  shown  to  be  requisite  for  the  entire  circulation.  With 
such  an  expansion,  prices  could  not  be  expected  to  fall  to  the  pro- 
per standard  ;  and  the  conclusion  seems  inevitable,  that  one  or 
other  of  these  sources  of  expansion  must  be  restrained.  The  cur- 
rency act  has  distantly  guaranteed  to  the  holders  of  currency  the 
right  to  receive  new  issues  upon  the  abatement  of  one-third, from 
the  old  ;  and  this  right  cannot  justly  be  impaired.  It  should  only 
be  dealt  with,  therefore,  by  offering  to  the  holders  of  these  notes  a 
security  which  they  might  prefer  to  the  new  issues.  Possibly  this 
might  be  done  by  giving  them  an  option  to  exchange  their  notes 
for  four  per  cent,  bonds,  free  from  taxation.  This  freedom  from 
taxation  would  be  an  equivalent  for  the  reduction  of  one-third  to 
which  their  notes  had  been  subjected;  and  if  this  plan  were  ac- 
cepted, equality  between  these  holders  and  those  who  had  already 
funded  their  notes  in  four  per  cents,  might  be  restored,  by  granting 


to  the  latter  the  privilege  of  'exchanging  their  four  per  cent,  taxable 
bonds  for  untaxable,  at  a  reduction  of  one-third.  The  compensa- 
tion to' the  Treasury  would  be  found  in  the  amount  which  would 
thereby  be  paid  in  money,  instead  of  four  per  cent,  bonds,  for  the 
taxes  of  the  present  year. 

This  arrangement,  however,  with  individuals,  if  left  as  it  should 
be,  to  their  choice,  would  be  beyond  the  control  of  the  Government. 
The  other  source  of  issue,  namely,  that  by  the  Government,  is  the 
one  which  is  under  its  complete  control.  It  is  the  restraint  of  this 
alone  which  will  enable  it  to  prevent  a  new  redundancy  of  circu- 
lating medium.  It  therefore  becomes  an  inquiry  of  vital  importance 
to  ascertain  how  far  this  restraint  can  be  carried.  Obviously  it 
depends  upon  the  extent,  and  availability  cf  the  other  means  fur- 
nished by  Congress,  for  supplying  the  demands  of  the  Government. 
The  means  -which  have  been  already  provided  by  Congress,  (over 
and  above  the  issue  of  new  Treasury  notes)  are  three,  namely,  the 
sale  of  500  millions  of  six  per  cent,  bonds,  certificates  of  indebted- 
ness and  taxes, 

1.  The  six  per  cent,  bonds  authorized  by  Congress,  offer  so  de- 
sirable a  security,  that  it  may  reasonably  be  expected  that  they 
will  be  taken  up  to  the  full  extent  of  the  available  capital  of  the 
country.  The  mechanical  arrangements  required  for  the  issue  of 
bonds  with  so  many  coupons,  will  delay  their  issue  until  the  month 
of  May.  In  the  meantime,  to  support  the  Government  during  the 
month  of  April,  and  to  pay  off  the  accumulation  of  public  indebt- 
edness, which  arose  from  itho  indisposition  to  accept  payments  in 
old  currency,  since  the  passage  of  the  currency  act,  it  became  ne- 
cessary to  exercise  the  authority  to  issue  new  Treasury  notes.  At 
the  date  of  this  report,  38  millions  have  been  issued,  and  ten  mil- 
lions in  five  hundred  dollar  notes  are  prepared  for  issue*;  and  this 
issue  must  be  continued  until  the  bonds  can  be  sold.  They  have 
already  been  advertised,  and  will  be  offered  for  sale  early  in  May  ; 
and  it  is  hoped  that  the  proceeds  of  their  sale  will  supply  means 
for  supporting  the  Government,  without  resorting  to  the  authority 
to  issue  Treasury  notes. 

2.  The  next  means  of  supply  provided  by  Congress,  is  through 
certificates  of  indebtedness.  These  certificates  offer  another  de- 
sirable security,  and  would  seem  to  be  peculiarly  available  for 
making  purchases.  They  are  payable  in  specie,  two  years  after 
peace, 'and  bear  six  per  cent,  interest.  It  is  of  the  utmost  im- 
portance that  the  various  purchasing  officers  of  the  Government 
should  use  these  certificates,  instead  of  calling  upon  the  Treasury 
for  new  issues  of  notes.     It  is  so  much  easier,  however,  for  both 


buyer  and  seller  to  deal  in  notes,  that  the  temptation  to  call  for  them 
is  invincible,  and  ran  only  be  restrained  by  an  absolute  refusal  to 
furnish  them.  The  experience  of  this  department  has  shown,  that 
an  authority  given  to  it  to  issue  Treasury  notes  as  an  alternative 

for  bonds,  results  in  compelling  it  to  furnish  the  notes,  whatever 
may  he  its  own  opinion  as  to  the  inexpediency  of  the  issue.  It  is 
in  this  way  that  the  late  redundancy  of  the  currency  was  producd. 
As  far  back  as  May,  1861,  when  the  first  issue  of  bonds  and  Trea- 
sury notes  jointly  was  authorized,  the  Secretary  used  every 
in  his  power,  to  induce  the  various  purchasing  officers  to  make  use 
of  bonds  instead  of  Treasury  notes.  This  efrort  was  continued  under 
the  act  of  August,  1801,  and  he  even  ventured  upon  the  compulsory 
method  of  holding  back  his  warrants  on  requisitions,  unless  bonds 
would  be  accepted  instead  of  Treasury  notes.  The  pressure,  how- 
ever, for  the  notes  became  so  great,  that  he  was  unable  to  resist  it. 
In  these  circumstances  he  distinctly  presented  to  Congress  the  evils 
which  must  follow  the  expansion  thus  produced  ;  and  during  the 
session  of  September,  1802,  urged  upon  them  to  take  immediate 
measures  to  absorb  the  redundant  currency.  Embarrassed  as  Con- 
gress then  was,  with  supposed  constitutional  difficulties  in  the  way 
of  levying  a  tax,  a  large  forced  loan  was  the  only  alternative  which 
could  be  offered.  This  alternative  was  rejected  ;  and  it  was  not 
until  April  24th,  1803,  that  a  tax  adequate  to  the  wants  of  the 
country  could  lie  imposed  ;  and  this  tax  was  so  complex  and  intri- 
cate, that  its  collection  could  not  be  fairly  set  in  action  until  the 
following  October.  The  only  tax  laid  before  this,  was  the  war  tax 
of  August,  1801,  of  one-half  of  one  per  cent,  on  property;  and 
small  as  this  was,  all  the  States  except  three  intervened  and  paid 
the  amount  due  by  their  respective  citizens,  by  the  issue  of  their 
own  securities.  Even  under  all  this  pressure  the  Government  suq- 
ceeded  in  effecting  a  foreign  loan  of  fifteen  millions  of  dollars  at  a 
time  when  the  Northern  Government,  with  all  its  resources,  and 
with  a  commerce  open  to  the  whole  world,  was  unable  to  effect.one. 
If  the  Treasury  Department  had  been  permitted  to  apply  this  money 
to  the  support  of  the  currency,  its  excessive  issue  and  consequent 
depreciation  would  have  been  postponed,  if  not  prevented.  But 
the  pressing  demands  of  the  Government  for  ignitions  of  war,  and 
for  expenditures  abroad  for  the  army  and  navy,  consumed  the  en- 
tire proceeds  of  the  loan.  An  effort  was  then  made  to  combine  the 
credit  of  the  individual  States  with  that  of  the  Government,  with  a 
view  to  procure  further  means  to  call  in  the  circulation.  That 
effort  failed  to  receive  the  support  of  some  of  the  States,  and  before 
that  support  could  be  propitiated  by  further'efforts,  military  re- 


verses  put  an  end  to  all  hope  of  present  relief  from  foreign  loans. 
In  the  meantime,  many  of  the  states  entered  upon  the  same  field  of 
credit,  issued  large  amounts  of  bonds  and  Treasury  not5"s,  and  the 
result  was  that  expansion  which  has  just  been  remedied,  and  which 
ought  not  to  be  permitted  to  recur.  The  financial  measures  adopted 
at  the  last  session  of  Congress,  have  given  the  country  a  new  starting 
point.  The  currency  is  once  more  brought  within  bounds,  and  it  is 
most  earnestly  urged  upon  Congress,  so  to  fence  around  those  bounds, 
.that  they  cannct  be  passed.  This  can  only  be  done  by  a  careful 
revision  of  every  appropriation,  and  by  admitting  only  such  as  are 
absolutely  necessary ;  by  a  steady  refusal  to  increase  the  volume  of 
the  currency,  and  by  providing  sufficient  other  means  to  meet  the 
appropriations  which  shall  be  made. 

3.  This  brings  us  to  the  consideration  of  the  remaining  means 
*of  supply  which  have  been  afforded  by  Congress,  namely,  taxes. 
This  source  of  supply  is  in  fact  the  foundation  of  all  others  ;  with- 
out it.  they  cannot  be  sustained.     Two  kinds  of  taxes  have  been 
provided,  those  in  money  and  those  in  kind.     The  money  taxes  to 
be  paid  during  the  current  year  have  been  devoted  by  Congress 
almost  entirely  to  the  support  of  the  currency.     The  tax-payers 
are  allowed  to  pay  their  taxes  with  the  4  per  cent,  bonds  and  cer- 
tificates in  which  the  cur/ency  has  been  funded.     It  is  presumed 
that  every  taxable  party  has  supplied  himself  with  bonds  to  the 
estimated  amount  of  his  tax  ;  and  if  there   be  cases  of  deficient 
provision,  doubtless  they  will    be  supplied  from  surplus  amounts 
funded  by  others,  and  offered  for  sale  in  the  market.     It  is  proba- 
ble, therefore,  that  no  material  aid  will  be  derived  by  the  Treasury 
during  the  present  year  from  any  taxes  but  those  in  kind.     This 
seems  to  me  to  be  an  unfortunate  feature  in  the  Tax  Act.     Pay- 
ment into  the  Treasury  of  Treasury  notes  is  a  necessary  instru- 
ment to  their  proper  circulation.     Without  the  aid  of  such  an 
instrument,  the  currency  of  the  notes  depends  entirely  upon  con- 
sent.    They  are  deprived  of  one  of  the  essential  elements  of  value, 
namely,  general  demand.     The  new  notes,  not  being  required  to 
pay  taxes  until  next  January,  lose  this  valuable  incident  during 
oll^hat  interval,  and  must  obtain  currency  entirely  from  the  good 
wili  of  the  community.     Another  equally  serious  difficulty  arises 
from  the  same  cause.     The  planting  interest,  wherever  it  is  beyond 
the  reach  of  the  enemy,  is   prosperous  and  can  contribute  to  the 
public  wants  as  largely  as  any  other.     The  tax  law  requires  from 
it  a  tax  in  kind  of  ten  per  cent,  on  its  annual  produce,  and  of  five 
per  cent,  on  capital,  but  it  allows  the  tax  on  the  produce  to  be  set 
off  against  the  tax  in  money,  and  it  ensures  the  extinguishment  of 
2 


10 

the  money  tax   by  valuing  the  produce  at  its  present  price,  while 
the  capital  is  valued  at  prices  of  1861.     It  follows  that  the  plant- 
ers are  relieved    from  any  necessity  to  provide  themselves  with 
Treasury  notes,  and  may  withhold  from  the  mnrket  their  produce 
at  pleasure.     It  follows,  also,  that  the  prosperous  are  favored  with 
a  discount,  while  the  unfortunate,  whose  farms  bav«  been  desolated, 
are  required  to  pay  upon  the  value  of  their  capital,  without  any 
relief  from  crops.     It  would  seem  more  just  to  reverse  such  a  rule, 
and  to  require  the  larger  contribution  from  those  whose  property 
has  been   protected  at  the  expense  of  the  others.     Proceeding  on 
the   same  general  grounds,  the  Tax  Act   further  exonerates  from 
the  income  tax  of  the  present  year,  all  property  upon  which  a  capi- 
tal  tax  shall  be  paid,  but  it  makes  no  such  discrimination  in  assess- 
ing the  capital  as  is  made  in  favor  of  agricultural  property.     All 
property  and  income  not  agricultural  is  assessed  at  present  rates. 
In  another  connection,  I  will  invite  your  attention  to  the  injustice 
of  these  inequalities.     My  object  now  is  to  induce  a  ^considera- 
tion of  this  portion  of  the  Tax  Act.     It  has  already  been  shown 
that  as  the  act  now  stands  no   pecuniary  aid  is  afforded  to   the 
Treasury  during  the  present  year,  and  that  unless  sufficient  sup- 
plies shall  be  derived  from  sales  of  bonds  and  from  certificates  of 
indebtedness,  there  will  be  nothing  left  but  a  resort  to  new  issues 
of  Treasury  notes.     It  is  therefore  of  the  utmost  importance  to  call 
into  requisition  every  possible  means  of  preventing  such  a  calamity. 
The  taxes  offer  the  most  appropriate  and  efficient  means,  and  can 
be  ma^de  to  contribute  largely  by  simply  repealing  so  much  of  the 
Tax  Act  as  allows  income  taxes,  whether  in  kind  or  in  money,  to 
exonerate  from  the  tax  on  capital.     The  tax  of  ten  per  cent,  on 
the  planter's  income  leaves  him  an  abundant  surplus  for  his  sup- 
port, and,  if  justly  considered,  is  greatly  less  than  the  tax  which 
other  interests  are  required   to  pay  on  capital.     Let  the  two  be 
compared  and  this  will  at  once  be  manifest.     As  a  general  rule, 
the  interest  of  money  represents  the  usual  income  of  capital.     A 
tax  of  ten  per  cent.,  then,  on  the  income  of  $100,  would  amount 
to  60  cents,  While  a  tax  of  five  per  cent,  on  the  capital  would  be 
five  dollars.     It  will  be  said,  however,  that  the  tax  in  kind,  being 
upon  gross  products,  must  be  rated  at  more  than  the  nett  income 
or  interest  on  other  property.     Let  this  be  admitted  and  assume 
that  the    tax  on  gross  income  is   double  the  amount  of  a  tax  on 
nett,  and  we  still  have  the  inequality  of  five  dollars  against  one 
dollar  and  twenty  cents.     But  when  to  this  inequality  is  added 
that  produced  by  assessment  at  the  two  rates  already  explained, 
the  inequality  amounts  to  iujustice.    The  proper  remedy  for  the 


11 

whole  is  to  te  found  in  an  equal  tax  upon  all  capital  and  upon  all 
income  at  the  same  basis  of  assessment.  The  present  system  of 
taxation  is  so  cumbrous  and  intricate  that  delay  and  disappoint- 
ment will  be  its  inevitable  results  ;  and  whenever  another  tax  bill 
is  framed  I  would  renew  my  former  recommendation  and  urge  that 
it  be  a  simple  tax  upon  property  and  incomes.  At  present  I  will 
limit  my  recommendation  to  a  repeal  of  the  following  provisions  of 
the  last  act : 

1.  That  which  allows  the  value  of  the  tax  in  kind  to  be  deducted 
from  the  tax  of  five  per  cent,  on  agricultural  property. 

2.  That  which    repeals  the  income  tax  for  the  present  year  on 
incomes  derived  from  property  taxed  as  capital. 

3.  That  which  discriminates  as  to  the  date  to  which  assessments 
are  to  have  reference. 

The  taxes  in  kind  levied  by  the  last  Tax  Act  appeared  to  me  to 
embrace  (and  with  much  propriety)  another  subject  matter,  namely, 
gold  and  silver  in  the  form  of  coin,  gold  dust  or  bullion.  Some 
embarrassment  in  reaching  this  conclusion  was  experienced  from 
apparently  conflicting  provisions  of  the  tax  and  assessment  acts. 
The  latter  directed  coin  to  be  assessed  at  its  value  in  Confederate 
Treasury  notes,  unless  otherwise  provided  in  the  law  imposing  the 
tax.  The  former  act  placed  in  one  and  the  same  class,  coin,  gold 
dust,  and  bullion,  and  imposed  a  tax  of  five  per  cent,  upon  the 
"amount."  The  word  "amount,"  as  to  coin,  was  susceptible  of 
two  meanings,  namely,  the  sum  stamped  thereon,  and  the  actual 
quantity  of  metal.  The  other  members  of  the  class  were  free  from 
this  ambiguity  and  could  only  be  rated  by  quantity.  It  seemed  to 
follow  that  the  same  meaning  must  attach  to  all  the  members  of 
the  same  class.  This  conclusion  was  strengthened  by  the  direc- 
tion to  rate  sterling  exchange  (which  is  usually  treated  as  a  correl- 
ative of  coin)  at  its  value  in  Treasury  notes,  and  by  the  further 
direction  already  noticed  in  the  assessment  act  to  assess  coin  in  the 
same  way.  .It  was  obvious  that  the  holder  of  coin  would  suffer  no 
injury  by  contributing  such  portion  of  his  coin  in  kind,  as  under 
any  circumstances  he  was  bound  to  furnish  sufficient  Treasury  notes 
to  purchase,  ft  was  thought  probable  that  the  tax  in  kind  was 
intended  by  Congress  to  relieve  the  Government  from  the  obnox- 
ious duty  of  depreciating  its  own  currency.  The  tax  levied  ia 
this  form  is  also  more  beneficial,  as  it  will  secure  to  the  Govern- 
ment a  portion  of  those  large  Amounts  of  coin  which  have  fled 
from  the  plundering  hand  of  the  enemy  and  have  found  protection 
here ;  and  further,  as  it  will  enable  the  Government  to  meet  such 
demands  for  coin  as  occasionally  arise. 


12' 

There  is  another  portion  of  the  Tax  Act  to  which  I  would 
respectfully  direct  the  attention  of  Congress.  A  tax  is  imposed  inmn 
the  capital  stocks  of  all  'Banks  and  other  corporations,  and  another 
is  laid  upon  all  solvent  credits.  The  effect  of  these  two  enact- 
ments is  to  tax  the  capital  of  any  corporation  as  stock  and  then 
again  to  tax  the  securities  in  which  the  capital  is  invested.  Banks 
of  issue  would  be  taxed  even  beyond  chis.  Their  issues,  like  their 
capital,  are  invested  in  securities.  If  these  issues  should  be 
extended  to  twice  the  capital,  (as  many  of  them  are  permitted  by 
their  charters  to-do,)  the  Bank  would  have  to  pay  a  tax  of  five  per 
cent,  on  its  capital,  and  then  of  live  per  cent,  more  on  the  total 
amount  of  credits  in  which  its  issues  have  been  invested,  amount- 
ing together  to  15  per  cent,  oh  its  capital.  This  result  is  so  mani- 
festly unjust  that  I  concluded  that  Congress  could  not  have  intended 
it.  It  probably  was  supposed  that  Banks  came  under  the  excep- 
tion in  favor  of  any  registered  business.  This  exception,  however, 
does  not  include  Banks  of  issue.  I  have  therefore  directed  the  ass 
sessors  t#  make  assessments  in  such  form  as  will  enable  Congress 
to  remedy  the  difficulty  before  the  tax  becomes  payable.  Several  of 
the  Banks  have  applied  for  relief,  and  1  respectfully  commend 
to  your  attention  a  memorial  which  they  have  presented  to  this 
Department,  a  copy  of  which  is  herewith  submitted. 

Another  embarrassment  in  administering  the  Tax  Act  has  been 
encountered  in  that  portion  which  directs  the  tax  in  kind  of  farmer3 
to  be  deducted  from  the  tax  of  five  per  cent,  on  their  capital.  If 
the  deduction  intended  was  of  the  tax  in  kind  of  last  year,  then 
the  planting  interest  will  ba  entirely  relieved  from  the  taxes  of  last 
year,  whilst  all  other  interests  have  duly  contributed.  If  the  refer- 
ence is  to  the  tax  in  kind  of  the  current  year,  then  as  the  money 
tax  is  payable  in  June,  and  the  tax  in  kind  cannot  be  realized  until 
later  in  the  year,  it  is  impossible  to  deduct  the  latter  from  the 
iormer.     Some  explanatory  act  is  respectfully  asked. 

I  cannot  leave  this  subject  without  specially  invoking  your  atten- 
tion to  the  inequality  made  by  the  Tax  Bill  in  the  assessment  of 
agricultural  and  other  property.  While  the  latter  is  assessed  at 
its  value  in  Treasury  notes,  which  are  acknowledged  to  be  depre- 
ciated at  lea3t  to  one-third  their  face,  the  former  is  assessed  at 
values  which  prevailed  when  Treasury  notes  were  nearly  at  par 
with  specie.  This  inequality  creates  discontent  in  the  public  mind, 
and  cannot  be  maintained  as  just  arid  equal.  In  all  public  as  well 
as  private  transactions  it  is  dangerous  to  depart  from  the  great 
principles  of  justice  with  a  view  to  effect  present  expediency. 
Doubtless  it  was  supposed  that  legislation  of  this  kind  would  reach 


13 

the  speculator  and  extortioner.  But  it  will  be  found  that  most  of 
these  classes  have  escaped  the  tax  by  taking  refuge  in  agricultural 
investments  ;  while  thousands  of  widows  and  orphans  and  loyal 
citizens,  who  have  invested  their  all  in  stocks  and  securities,  are 
deprived  of  their  means  of  support.  I  would  respectfully  recom- 
mend a  revision  of  this  section  and  the  establishment  of  a  uniform 
rate  of  assessment. 

The  report  of  the  Commissioner  of  Taxes  will  present  the  results 
of  the  collection  of  taxes  as  far  as  progress  has  been  made.  The 
amount  collected  is  $82,262  349  83.  The  difficulties  which  are 
ei. countered  in  the  collection  can  only  be  estimated  by  any  one 
who  will  inspect  the  mass  of  papers  which  are  required  for  each 
return,  and  the  inquiries  necessary  to  be  made  of  each  individual 
tax-payer.  The  results  of  the  tax  will  probably  confirm  the 
recommendation  already  made  of  a  resort  to  a  more  simple  system 
of  taxation.  The  frauds  and  evasions  which  cannot  be  discovered 
under  the  present  system  are  a  perpetual  drain  upon  the  tax,  which 
is  necessarily  increased  by  the  number  of  officers  who  must  be 
employed  in  its  collection.  And  after  all  is  done  by  the  Govern- 
ment which  is  possible,  the  result  is  that  the  most  cunning  in 
devices  will  escape,  whilst  only  the  honest  and  conscientious  pay 
the  full  and  just  demands  of  the  law.  In  the  process  of  collection 
various  amendments  to  the  law  have  been  found  necessary,  which 
will  be  brought  to  your  attention  in  the  report  of  the  Commissioner 
of  Taxes,  to  which  I  respectful'y  invite  your  attention. 

The  act  imposing  restrictions  on  the  export  of  cotton,  tobacco 
and  naval  stores,  and  that  prohibiting  the  importation  of  articles 
of  luxury,  have  received  the  attention  which  they  demanded. 
Under  the  first  act  certain  regulations,  issued  by  the  President,  of 
which  a  copy  is  herewith  submitted,  will  fully  exhibit  what  has 
been  done  ;  and  under  the  second,  this  Department  has  executed 
the  duty  imposed  upon  it  as  to  the  limitation  within  which  impor- 
tations shall  be  made  of  articles  to  be  used  for  wearing  apparel. 
A  copy  of  the  instructions  issued  to  the  collectors  of  customs  on 
this  subject  is  herewith  submitted.  The  customary  estimates  in 
detail  are  hereunto  appended. 

Respectfully  submitted. 

C.  G.  MEMMINGER, 
Secretary  of  the  lYeasury. 


peRrrulife* 
PH8.5 


